Stocks moved sharply higher again on a very strong breadth of around 5,650 gainers to 1,850 decliners. The number of stocks hitting new 12-month highs expanded to over 900 and volume was very strong, thanks to volume in lower-priced stocks. But there was a high level of rotational action that kept trading tricky.
The speculative traders that did well on Monday with the electric vehicle and special purpose acquisition companies struggled Tuesday, as money moved back into some of the traditional growth stocks. FATMAAN names recovered after a poor day on Tuesday, but value groups like banks performed well also, with the Financial Select Sector SPDR fund (XLF) gaining 3.3%.
Market participants continue to look past the short-term surge in Covid-19 cases and are embracing the standard reopening plays, such as retailers, airlines, and oil.
Another factor at play is that traders are aware of positive seasonality and are exhibiting a greater willingness to chase stocks regardless of valuations. The primary focus is on price action and it is a well-known fact there is a strong positive bias from the close on Tuesday to the close on Friday. Next Monday is traditionally a weak day, but that isn't of any immediate concern right now.
While this action is both choppy and frothy, traders will likely be looking for some "holiday trading" in individual stocks on Wednesday and during the half-day session on Friday. It isn't as easy as it sounds, but there is a positive bias that will favor some fast trades if you can catch the right merchandise.
Have a good evening. I'll see you tomorrow.